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Chipping away

Intel turns 50 in 2018, and its critics say the company is displaying all the hallmarks of a mid-life crisis. For the first time since 1992, Intel lost its crown as the world’s largest semiconductor chip maker to Samsung during the second quarter.

Intel has long dominated the design and manufacturing of computer chips, and latterly server chips. Getting knocked off the top spot was largely the result of failing to find the same footing in the mobile communications space (where it has been losing out to chip designers Mediatek and Qualcomm).

Intel is also running late delivering its 10-nanometer (nm) process technology – the latest step- change to smaller and smaller geometries. The company recently conceded it has stretched out the famous Moore’s Law of its founder (that transistor density will double every two years) to three years or, as Intel now puts it, added an additional ‘tock’ after tick-tock.

However, at its Chinese Technology and Manufacturing Day this month, Intel claimed that other manufacturers have been misleading the industry by mislabelling the node densities they are operating at. Some companies have “gotten fast and loose in terms of how they name their process technologies,” said Stacy Smith, group head of manufacturing.

For example, Mark Bohr, senior fellow at Intel’s technology group, commented that the company’s existing 14nm technology has the same transistor density as TSMC and Samsung’s “so-called” 10nm processors, which they are already deploying. He also said Intel’s 10nm technology will be equivalent to TSMC and Samsung’s proposed 7nm design, which the two companies hope to put into commercial operation in late 2018 or early 2019.

PC Perspective says that while Intel “is not immune” to playing the name game, the company is “closer to describing these products than the competition”. If that is the case, then Intel might still be ahead of Samsung and TSMC – even though it is yet to put its 10nm process technology into commercial production.

China will play a key part in the company’s future growth. 36.kr.com says Intel has already spent $13 billion there and plans to grow its manufacturing base and create a better ecosystem to support its local foundry business. The company also has a 20% stake in RDA Spreadtrum, the mobile design subsidiary of China’s largest chip manufacturer, Tsinghua Unigroup. Both of Spreadtrum’s new SC986iG-1A and SC9853 chips were designed using Intel’s 14nm OEM capacity.

As tech journals point out, there are only four companies capable of manufacturing chips with leading edge technologies – TSMC, Samsung, Intel and Global Foundries. Taiwan’s number two firm, UMC, for example, is only just reaching 14nm.

This growing concentration at the top end of the industry is the result of the prohibitive costs required to manufacture chips at ever-lower geometries. Scale is key and that’s likewise the main reason why another well-known tech company was forced to accept a white knight approach last week.

Taiwan’s HTC built the world’s first Android smartphone, but the handset manufacturer has increasingly struggled. And now Google hopes to join the smartphone big leagues after announcing a $1.1 billion deal for HTC’s handset business as well as a non-exclusive licence for HTC’s intellectual property.

Google hopes the integration of hardware and software operations will help to promote its own Android ecosystem to rival Apple’s. With the HTC deal comes a 2,000-strong R&D team (the Taiwanese firm will now concentrate mainly on its virtual reality business).

Unlike Intel, Google can’t be accused of a mid-life crisis. But for its investors there will be a sense of déjà vu in the purchase of a phone hardware business. Google bought Motorola in 2011 for $12.5 billion only to resell the rump of that handset division to Lenovo for $2.91 billion three years later.

With the purchase of HTC’s smartphone business – which Business Insider said Google knows well since it ‘ghost manufactured’ the US firm’s Pixel handsets last year – the tech giant is doubling down on its bet that it can gain meaningful scale in an industry that has rapidly become among the most competitive in the world.

To succeed Google will have to beat Huawei, Xiaomi, Oppo, Vivo, ZTE, OnePlus and Lenovo (the key Chinese manufacturers) as well as Samsung, LG and Apple.

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